The Fourth Shock: How ‘Stealth Competition’ Fundamentally Transforms Business and Tech

When I mention the “Fourth Shock,” the first thing that comes to most people’s mind is “what are the first three shocks?” As the world transforms through new social, economic and political forces, these shocks reverberate through the business environment. During my recent visit to Stanford University as an invitee to the 60th anniversary of “Stanford Executive Program,” I learned about the three shocks in a keynote speech by Condoleezza Rice.

The aftermath of Sept 11, 2011 and the impact of terrorism on everyone’s life was the first shock. The whole geopolitical atmosphere changed while traditional perspectives on security and warfare were upended. The financial meltdown of 2008 and its impact on banks, the auto industry and the world economy constitute the second shock. The ripple effect of this shock has produced long-term fear, and the so-called recovery process still eludes millions of people four years later. Economists continue to grapple with implications of this crisis on fundamental assumption about the global economy. The third shock is social revolution and collaboration across the world in the form of “global citizen,” as dictators who had ruled for decades were overthrown in the “Arab Springs.” As recent events evidence, the results of this third shock may not be clear for years as uncertainty dominates the region.

Over the last decade there was another important change that produced shockwaves through the business world. It is a phenomenon known as “stealth competition,” and I would like to call it the “Fourth Shock.” The unusually volatile Global 500 rankings and competition in consumer electronics / telecom segments have produced many surprises. Nokia’s dominance in the telephone industry over Motorola was an unexpected development, but the long-term impact may be even greater on small camera manufacturers. As people started combining phone and camera needs, telecom players have begun making a strong play in the small camera market. This dominance of Nokia was almost immediately challenged by smartphone makers such as Apple and Samsung. Surprisingly, one is a computer manufacturer and the other makes appliances and TV screens. Apple first caught music industry giants like Sony and Panasonic completely off guard, and they are now challenging many traditional players such as IBM, HP, Dell and others. The industry is in a mode where traditional incumbents no longer command the focus. The big threat is from “stealth competitors” and other trends that are changing business models. The dominance of Google, Facebook and other social collaboration platforms are now challenging the fundamentals of who will pay for the bandwidth while using the telecom infrastructure.

My viewpoint is “products and solutions” will continue to dominate the industry and decide future battlegrounds. However the definition of those products will change. User experience and ability to leverage the ecosystem will become central as opposed to creating large scale enterprise products. The dominance of Oracle, SAP, and IBM in ERP/CRM/SRM type of enterprise products may face competition from unknown players, further fragmenting the market and pushing technology towards ease of use and homegrown apps. With hardware and hosting costs becoming insignificant, one must now worry about the implosion of large enterprise applications and get ready for the “Fourth Shock” from unknown territories.